George Osborne is to cast himself as the champion of Britain's hard workers when he unveils a series of measures designed to ease the pressure on low and middle-income earners and show the country faces a "painstaking" journey to recovery.

The chancellor is expected to announce that moves towards a tax-free allowance of £10,000 will be brought forward a year to 2014. A planned rise in fuel duty, due to take place in September, may be delayed or even scrapped altogether.

As the Treasury braces itself for a grim outlook, amid signs that the Office for Budget Responsibility will again downgrade growth forecasts, the chancellor will move to show that he is committed to stimulating the economy by announcing new capital spending projects.

Osborne and his Liberal Democrat deputy, Danny Alexander, told the cabinet on Tuesday that they will direct an extra £2.5bn over the next two years into capital projects after imposing a new 1% cut on some Whitehall departments.

Amid criticism that the Tories blundered in the Eastleigh byelection, by failing to focus on the challenge of the rising cost of living, the chancellor aims to turn the focus in his budget statement to support for hard pressed families.

The measures on the personal allowance and fuel duties are carefully balanced to satisfy both sides of the coalition. This follows the disastrous handling of last year's budget, which Osborne blamed on the Lib Dems after they allegedly leaked detail of his key measure, to cut the top rate of tax from 50p to 45p.

The Lib Dems made raising the personal tax allowance to £10,000 the first pledge in their general election manifesto. A source said: "Reaching the £10,000 figure will represent a major coup for the Lib Dems."

Action on the fuel duty increase will be warmly welcomed by Tory MPs in marginal constituencies. Robert Halfon, the MP for Harlow, who has led a lengthy campaign against fuel duty increases, told the Guardian: "I am very hopeful this will be a cost of living budget and that the chancellor is listening regarding fuel duty being a toxic tax and one of the biggest brakes on people getting back on their feet."

The chancellor will also scrap a planned 6p rise, due next month, on the price of a pint of beer and will do away with the beer duty escalator, according to the Sun.

A Treasury source said: "This will be a budget that is going to help people who want to work hard and get on. It will continue with the painstaking work of putting right what went so badly wrong in the British economy. While it is a tougher road than anyone hoped, and while there are no easy answers, we are making progress and the budget will keep Britain on the right track."

A plan to offer childcare support of £1,200 per child for families where both parents are earning up to £150,000 each was criticised by the Mothers at Home Matter charity for discriminating against stay-at-home mothers. Campaigners seized on an internal treasury document, accidentally published on its website, which said that families where both parents want to work, but cannot afford to, "are in greater need".

The row prompted a call by Tory MPs for the introduction of a married tax allowance. Robert Buckland, MP for Swindon South, said: "The best way to deal with this is to advance what was the Conservative agenda to have a transferable tax allowance that would benefit the family."

The chancellor's move on departmental spending served notice of tough times when he told the cabinet that a series of Whitehall departments will face an extra 1% cut over the next two years to allow him to divert £2.5bn towards capital spending and to put £1.2bn aside for the next spending period in 2015-16.

The move showed the success of the so-called "National Union of Ministers", who have been resisting further cuts to their departments, after a trio of Tory cabinet ministers emerged largely unscathed.

Theresa May, Philip Hammond and Eric Pickles, whose departmental budgets are not ringfenced, have managed to ensure that key spending areas will escape the cuts.

The chancellor told ministers there would be a further 1% cut a year on all "unprotected departmental resource budgets" over the next two years. The three budgets that will remain immune from the cuts are health, schools and international development, though the last will be adjusted downwards if Britain's gross national income (GNI) shrinks.

The Ministry of Defence will benefit from what the prime minister's spokesman described as "exceptional flexibility", allowing £1.6bn of its underspend to be "rolled over" into 2013-14 and 2014-15. Police grants will not be affected by cuts for 2013-14.

This marks a significant victory for May, the home secretary, because the police budget accounts for two-thirds of the total Home Office budget.

Chris Leslie MP, the shadow Treasury minister, said: "An increase in capital spending of just £2.5bn compares to deep cuts of £12.8bn to infrastructure investment in the last three years on the plans George Osborne inherited. If this is the only additional investment in infrastructure in the budget it will be a huge disappointment.

Business groups, the IMF and even Vince Cable have all said now is the right time to invest, at record low interest rates, in building homes, road and schools to create jobs now and strengthen our economy for the future.

"The test for the budget is whether it delivers bold action to kickstart our flatlining economy and significant tax cuts for middle and low-income families, not a £3bn tax cut for the very richest and more of the same failing policies."

The announcement by Osborne over the weekend that he will bring forward the single-tier pension by one year to 2016 will give the exchequer a windfall of £5.5bn as contracting out is ended. This will lead to increased national insurance contributions (NICs). But £4.3bn of this will be used to fund the costs of long-term social care or be used to compensate government departments facing increased employer NIC payments. This leaves the chancellor little room to raid these funds.